In this series of articles, we are looking at how to optimise your domain portfolio across the different business models of sales (big and small), traffic and development. The first model I have been unpacking is development, not the technical aspects but the business aspects of domain development.

We’ve explored why people return to websites and how to earn money from advertisers. In this article I will be discussing how to build an online business selling services and products.

The first thing we need to separate out is the different between building a business and conducting a transaction. Building a business is all about repeatable revenue that ideally grows over time while transactions are the big deal you hope to get one day.

My wife has a great saying, “Like clockwork.” What she means by this is that she would much rather have twenty dollars each month coming in from a customer than the big deal that may happen one day.

After attending a domain conference and hearing all about the great big things people are doing (most are not true btw) it’s easy to lose sight of what is really driving your business in the quest for the big deal. This is particularly appropriate for selling services and products. Don’t get me wrong, I love the big deals but they just take up so much time and have about a one percent chance of coming off.

So why am I a big fan of my wife’s saying? It proves a number of things about your new online business:

1. You have traffic.
2. The traffic is the correct type because it’s purchasing your service/products.
3. Each month the revenue has the potential to grow with more subscribers.

Once you have these items in place all you need to do is repeat as many times as possible and ensure that the backdoor is closed. If two things happen, your business will then have no choice but to grow:

1. You get more of the same type of people to your website.
2. Your existing customers continue to keep their subscription/buying habits in place. This is the ultimate endorsement of your product/service.

Of course, I’m working under the assumption that you have your pricing right and that your customer acquisition costs don’t put you into a loss making situation.

People will subscribe to services/products for a variety of reason but generally speaking it’s because they can’t get the service/product from elsewhere. Associated with this is whether the new customers trust you enough to part with their cash. One of the problems that many news websites are experiencing is there is always another website where the same content is for free.

Let’s imagine that I decided to charge for access to my articles here on my blog. My guess is a few people would subscribe while the vast majority would write horrible things about me in the forums. My advertisers would abandon me and whizzbangsblog would become a shadow of its former self…..so I’m not too excited about this idea.

This raises an important issue that newspapers from around the world are wrestling with. When you’ve given something online away for free it’s really hard to then start charging for it. So going free is great as long as it’s in line with your overall business strategy.

In my case, I’m happy to write articles and share my experience with people because I believe in giving back to my industry and my sponsors like it. Although, if you have quality unique content that isn’t just a regurgitation of everyone else’s then you may get away with a paywall.....but it had better be really good content!

So let’s imagine I’m wanting to increase my revenue through some sort of subscription basis. What I may do is have premium content that is behind a paywall and leave the blog articles as they are. This strategy is used a lot in the software industry where you can have the free version of some software which has a few features or pay an annual subscription for the full version.

Another thing I could do is provide something completely different from my blog posts. For example, for twenty dollars a quarter I’ll automatically send you an awesome T-shirt with a really funny domain related statement on it or a domaining mini e-book/newsletter to help provoke your thinking about your business.

Better yet, why don’t I put together an online training course that takes a person from a novice domainer right through to a masterclass level. The course will include videos, notes and assessment so that it has some standing in the domaining community. There’s many different ideas you can adopt for your online business but my advice is you should test the market prior to investing a huge amount of money.

Two really interesting areas of subscription earnings that are only recently being exploited are subscriptions to highly targeted educational courses and products. For example, if I shaved with a blade I know that would love the concept of receiving new blades each month via a subscription service.

A couple of years ago I was listening to a radio show about guys and clothing. I couldn’t resist calling up the show and explaining to the presenter that I would love to subscribe to clothes. I hate going out to buy clothes and most of the time I just want to buy the same pair of jeans…..why not have a subscription for jeans?

I hope that you get the sense that all of these ideas are examples of subscription services. Just for the record, I have no desire to do anything with whizzbangsblog in that area…..I have enough on my plate!

It’s critical that every one of your domains has a business model associated with it so that you can make appropriate decisions about how to best increase their value or realise there value.

So what are the business models that I use?

Traffic domains – these domains are those that receive traffic and are monetised. The key is to extract the maximum value out of the traffic each and every day.

High Value domains – These are more often than not two letter or single word domains – for example, ab.com or vodka.com. These are the “rainbow” domains….in other words, if a large corporate decides to buy one then you’ll get the pot of gold at the end of the rainbow. I would highly recommend that you outsource these domains to a qualified good broker who knows how to create a market.

Stock Items – These domains are often multi-word domains and should all be priced and ready to sell at sub $1,500. You may get more…..which is great but it’s all about moving the stock. The ultimate goal here is to sell around 3% of your domains per year.

Development – You can’t develop everything….you just don’t have the time to impact thousands of domains in a meaningful manner but you do have the time to build a business on a few. My advice would be to build some domains into profitable businesses and then sell them off…..then repeat.

We could refine these categories a bit further but the message should be clear that every domain needs a business model. So take a look at your domains and ask yourself, what business model am I applying to it? In future blogs I'll see if I can unpack the different categories a bit further.

The first thing that I think about when I view my domains is not "where the next dollar will come from" but rather "Where the next dollar willl come from that sticks to my hands". In other words, show me the profit not just the revenue.

So let's take a look at the good old profit equation of revenue less expenses.

So where's the revenue going to come from in 2014 that will be past the dismal performance that many domainers experienced in 2013? Google will underpin much of the revenue as they have been doing for the last ten years of the industry but the real wins are going to come from direct advertisers and affiliates. We're seeing more and more traffic being won in our bidding system at ParkLogic by zero click solutions....which is always a good thing. If you don't have your domains in a program that has this to offer then give me a call as you're missing out on a bucket of revenue that's not dependent upon a single provider.

I'm not sure about you but I'm continuing to develop a number of websites.....just nudging them along bit by bit to get them to the point where they can then be a profit centre for me. If you aren't developing a website then once again you're potentially missing out on some good revenue.....but make sure that you develop something that you're interested in. I may have some great cosmetic domains but you know what? I have no interest in that industry other than when it relates to my wife and daughters.....then all husbands and dad's take an interest. :-)

Words of advice.......rainbows are pretty things but they are illusory. Likewise, if you plan on waiting for that ultimate huge sale then you may be waiting a LONG, LONG time. Price all your domains at what I would call fair rates and be prepared to sell them for those rates with NO seller's remorse. I work out my stock item domains from my high value you domains and I have a different strategy for each.....so get them into the marketplace and start selling. I'll have to do another blog on this concept.

On the expense side of your business most of them are locked in place. I'm sure that you can negotiate a better rate with your registrar but seriously, the margins for them with domainers are really slim. The biggest expense that is hidden is your time. The easiest thing in the world to do is keep a log of the amount of time that you spend on your domains (including checking stats) for a week and than multiply it by your hourly charge out rate to your business. That's a cost that you need to get down or technically your business may be unprofitable.....or you're earning $1 per hour.

Anyway.....I hope that this helps you out and provokes you into thinking about your domain business.